USDA Cotton Mill Economic Adjustment Assistance — Per-Pound Payments for Domestic Upland Cotton Users

Legal Authority

• 7 U.S.C. § 9037 (Agricultural Act of 2014, as reauthorized) — Establishes the Economic Adjustment Assistance (EAA) program for upland cotton users; authorizes per-pound payments to domestic textile mills that use U.S.-produced upland cotton in their manufacturing processes
• 7 CFR Part 870 — USDA Farm Service Agency (FSA) implementing regulations; governs payment rates, eligible uses, application procedures, documentation requirements, and payment calculations for cotton mill EAA payments

Key Mechanics

7 CFR Part 870 implements the Economic Adjustment Assistance program for domestic users of upland cotton — primarily textile mills that spin or weave U.S.-produced upland cotton into yarn, thread, or fabric. Under 7 U.S.C. § 9037, eligible domestic mills receive a per-pound payment on upland cotton purchased and used in domestic textile manufacturing. The payment rate is set by statute (historically 3 cents per pound) and applies to cotton used — not cotton merely purchased — meaning mills must document consumption in their manufacturing processes. To receive payments, eligible mills file applications with FSA covering each calendar quarter; applications must include documentation of upland cotton acquired, cotton consumed in production, and the resulting textile output. The program is intended to offset the competitive disadvantage U.S. textile mills face from imported textile goods produced in countries with lower raw material and labor costs. Payment eligibility requires that the cotton is U.S.-produced upland cotton (not pima/extra-long-staple) and that the use occurs in domestic manufacturing — exports of cotton by the mill are excluded. The program was created as part of the 2008 Farm Bill cotton provisions following WTO disputes over U.S. cotton subsidies.

Current Rule (2026)

What This Rule Does

The United States is the world's largest cotton exporter, but most U.S.-grown upland cotton is sold into export markets rather than processed domestically. When global market conditions make it cheaper for U.S. textile mills to import foreign cotton or foreign cotton products than to buy U.S.-grown cotton, domestic manufacturers face a competitive disadvantage — they pay higher input prices than their international competitors. Congress addressed this through the Economic Adjustment Assistance for Textile Mills (EAATM) Program, which provides direct payments to U.S. cotton processors to help offset this cost disadvantage and support domestic cotton manufacturing investment.

Seven CFR Part 870 governs the program. Eligible domestic users — companies that regularly open bales of upland cotton in the United States to manufacture yarn, paper, or non-woven cotton products — receive a cash payment based on how much upland cotton they consume each month. The payment rate is 5 cents per pound of upland cotton consumed. To ensure the assistance actually goes into productive capacity rather than general operations, the regulations require participating companies to reinvest at least as much as they receive in qualifying capital expenditures — machinery, equipment, plant improvements, and other depreciable assets used directly in U.S. cotton manufacturing.

Key Provisions

• § 870.1 — Applicability: CCC pays eligible domestic users who sign an Upland Cotton Domestic User Agreement with AMS; AMS designates required forms
• § 870.2 — Definitions: "eligible domestic user" means a U.S. company that regularly opens bales of upland cotton domestically to make yarn, paper, or non-woven cotton products; "capital expenditures" means spending on depreciable property like land, buildings, machinery, and equipment directly used in U.S. cotton manufacturing (not operating expenses); "marketing year" runs August 1 through July 31
• § 870.3 — Agreement: to receive payments, a domestic user must sign a current Upland Cotton Domestic User Agreement (Form CCC-1045DOM) and submit the signed original to AMS; AMS countersigns on behalf of CCC; the agreement defines obligations for the program year
• § 870.5 — Eligible cotton: upland cotton is eligible from the date the agreement becomes effective; cotton for which a payment has already been claimed is not eligible again; raw by-products (motes, pills, linters) have specific eligibility rules
• § 870.7 — Monthly reporting: eligible users must submit a Monthly Consumption Report (Form CCC-1045-UP-2) to AMS each month starting on the agreement's effective date; the report must document upland cotton inventory consumed, the payment amount claimed, and include a signed accuracy certification
• § 870.9 — Payment rate: 5 cents per pound of eligible upland cotton consumed; for baled cotton, consumption occurs when the bale is opened inside a U.S. manufacturing facility; for unbaled cotton, consumption is the processing date; payments are based on net weight (bale weight minus bagging and ties)
• § 870.11 — Capital expenditure requirement: program funds must be used exclusively for capital expenditures (not operating costs) within 18 months after the marketing year ends; the company must spend at least as much on capital projects as it received in program payments; large purchases above the threshold in the user's agreement require advance AMS approval including purchase descriptions, invoices, and facility information
• § 870.11 (extensions) — Capital expenditure extensions: AMS may grant up to 36 additional months for large projects (single assets costing more than $10 million), for a total of 66 months from the marketing year start; extension requests must include project plans, timelines, payment schedules, and operational start dates; assets must be in operation within 24 months of purchase or receive written approval for delay
• § 870.13 — Recordkeeping: three-year retention requirement after agreement ends; required records include monthly consumption logs (bale numbers, net weights, dates, cotton type, facility), purchase orders, contract registers, bale inventory summaries, and a supplemental ledger of qualifying capital expenditures claimed
• § 870.15 — Enforcement: AMS and CCC can terminate an agreement and require full repayment with interest if they determine a user employed dishonest schemes or misrepresentation; suspension from government programs may follow; dissatisfied users may appeal WCMD decisions to the AMS Director within 15 days, and then to USDA's National Appeals Division within 30 days of an adverse Director decision

How It Affects You

If you operate a U.S. textile mill or cotton processing facility that consumes upland cotton to make yarn, paper, or non-woven products, the EAATM program pays you 5 cents per pound of cotton consumed. For a facility processing 10 million pounds of upland cotton per marketing year, that is $500,000 in annual payments. The program is designed specifically for domestic manufacturers disadvantaged by the global price structure for cotton inputs.

The capital expenditure requirement is a condition of receiving payments, not an afterthought. You must invest at least as much as you receive in qualifying capital expenditures within 18 months after the marketing year. If you take $500,000 in payments, you must document $500,000 or more in capital spending on U.S. cotton manufacturing equipment, buildings, or machinery within the specified window. Failure to meet this requirement triggers repayment obligations.

The monthly reporting cadence is mandatory. You must submit Form CCC-1045-UP-2 every month during the agreement term. Missing months or submitting incomplete reports can result in payment denial for that period. Build the monthly report into your accounting workflow — the required data (bale numbers, net weights, dates, consumption amounts) must be tracked continuously, not reconstructed at year end.

Large capital purchases require advance AMS approval. If any single capital expenditure will exceed the threshold in your current user agreement, you must submit a pre-approval request to AMS before making the purchase. The request must include description, purchase order or invoice, expected dates, and which facility will receive the asset.

Asset transfer restrictions apply. Equipment purchased with EAATM funds must remain in operation at the U.S. facility for at least 36 months before being sold. If you sell, merge, or transfer your business, you must notify AMS and certify that program funds were not transferred to the buyer.

Statutory Authority

This rule implements:

• 7 U.S.C. § 9037 — Economic Adjustment Assistance for Textile Mills; enacted as part of the 2014 Farm Bill and continued in subsequent farm legislation; authorizes CCC to make monthly payments to domestic users of upland cotton based on consumption, contingent on capital investment in U.S. manufacturing

Recent Rulemakings

• 91 FR 8708 (2026) — Updated the program rules for the current marketing year, revising payment terms and agreement requirements
• 88 FR 74333 (November 2023) — Prior amendment to program regulations covering capital expenditure procedures and extension provisions

Pending Action